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ECB will announce a cut in the deposit rate - Rabobank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 7, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    Jane Foley, Senior FX Strategist at Rabobank, thinks that it is now beyond any reasonable doubt that the ECB will announce a cut in the deposit rate at the March 10 policy meeting.

    Key Quotes

    “Our forecast is for a 10bp cut to -40bp (to be followed by another 10bp cut in the June meeting). Although we do believe that a larger cut is possible – also taking into account the already elevated expectations in the market on this front – we do see a risk of Mr. Draghi receiving the same treatment as BoJ Governor Kuroda when he announced a cut into negative territory.

    This has everything to do with market dynamics. If the ECB opts for a bigger deposit rate cut, the market would take this as a sign that the next could be of a similar size (we assume that the ECB does not want to say that it is the ‘last cut’ – as this is hardly credible bearing in mind what happened last year). We could then see a domino-effect in global rates, as the currency war steps up a pace.”
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